中级微观经济学

1、MICROECONOMICSClassroom Lecture Notes (3 credits, as of 2004)based on Hal R. Varians Intermediate Microeconomics, Sixth Edition, referring to Pindyck and Rubinfelds Microeconomics, Fourth Edition. The source of all economic problems is scarcity. Problem of trade-off, and choice. Economics, as a way

2、of thinking, as a dismal science. Problems - solutions - hidden consequences. 1 individuals (household), 2 firms, and 3 governments.Objects of economic choice are including goods and services.Consumption, Production, and Exchange.to show the market mechanism (the invisible hand), to supplement it.pr

3、oduct market factor market The market relation is mutual and voluntary. Positive issues and normative issues.lRelations between lTotal magnitudes, lAverage magnitudes, and lMarginal magnitudes.1, MM is the slope of the TM curve;2, AM is the slope of the ray from the origin to the point at the TM cur

4、ve; TMMM(x*)AM(x*)x*x 3, TM increasing (decreasing) if and only if MM 0 ( MM AM ( MM 0. lThus both the income offer curves and the Engel curves are all rays through the origin. lExample:lQuasilinear preferences lead to vertical (horizontal) income offer curves andvertical (horizontal) Engel curves.S

5、lutsky EquationlHow the optimum moves when the price of a good changes? lDecomposition: lthe total effect = the substitution effect + the income effect.l p139 lThe pivot gives the substitution effect, lthe shift gives the income effect.lP103andp137lSlutsky identity, pivoting the budget line around t

6、he original choice. Fig.lHicks decomposition, pivoting the budget line around the indifference curve. Fig.Buying and Selling for a consumer with an endowment x1x1x2p111Net and gross demands, net supply. Offer curve and demand curve.p164lLabor supply p174$Leisure RLaborWLeisureEIntertemporal ChoicelS

7、uppose for example in a 3-period model,the consumption is ck and the interest rate is rk in period k, lthen the present value of the consumptions is lc1 + c2 / (1+r1) + c3 / (1+r1) (1+r2).lp190UncertaintylExpected utility functions, or von Neumann-Morgenstern utility functions. lThey are indifferent

8、 up to lany positive affine transformation.l(affine transformation: y = a + bx).lRisk aversion and risk loving.Concave vs convex utility.The second derivatives.$UUNet Surplus 1 2 3 4 5 6 p r1r2r3r4 r5r6Consumers Surplus p250消费者得益总收益Producers surplusSupply curveQP*Q*PQSupply curveChange in producers

9、surplusRTQQPPPPdPwQChange in consumers surplusBT+=PRICEDEMAND CURVED(p)QUANTITYIt is the sum of the individual demand curveThe market demand curveQUANTITYPRICEa /2a / 2b= 1 =1 ( 1/2 ,p = 0, 1 if q = 1/2 , 0 if q 1/2 ,q = 0, 1 if p = 1/2 , 1 if p 1/2 .q11 pN0lMethod of response functions: The interse

10、ctions of response functions give Nash equilibria(p*, q*) = (1/2, 1/2) in example)lNash Theorem: There is always a ( maybe “mixed”) Nash equilibrium for any finite gamelSequential games.lGames in extensive form versus in normal form. Battle of Sexes againBoyGirlBalletBalletBalletSoccerSoccerSoccer(

11、1, 2)( -1, -1)( 0, 0)( 2, 1)Strategies as Plans of Actions.Boys strategies: Ballet, and Soccer.Girls Strategies: Ballet strategy; Soccer strategy; Strategy to follow; and Strategy to oppose.lA pure exchange model of two goods, two consumers with fixed endowments w. l Region of mutual advantages.l Pa

12、reto set and the contract curve.l Bargaining for relative prices.l Gross demand x (p) , l Net or excess demand z (p) = x (p) - w (p).Person BPerson AxA1wA1Endowment wA2xA2GOOD 2GOOD 1xB1wB1xB2wB2MEndowmentPerson Bs indifference curveA Pareto efficient allocationPerson As indifference curveContract c

13、urvePerson AGOOD 1GOOD 2Person BlFrom disequilibrium to the competitive equilibrium. Which good is too cheap?lOffer curve approach. lThe existence problem of equilibrium. As ind, curvesBs ind. curvesAs offer curveBs offer curveGood 1 is Too cheapEquilibrium priceWEProduction functionIndifference cur

14、vesLaborL*C*CoconutsProduction possibilities setF*C*COCNUTSFISHPRODUCTION POSSIBILITIES SETSLOPE=MARGINAL RATE OF TRANSFORMATIONAPCl* Costs of exchange. l* Price difference between selling and buying. Fig.l* GATT and WTO. lBenthamite: W (u1, ,u n ) = a 1u 1 + + a n u n .lRawlsian: W (u1, ,u n ) = mi

15、n u1 , , u n .1, It should be complete, reflexive, and transitive;2, If everyone prefers X to Y, then the society should prefer X to Y;3, The preferences between X and Y should depend only on how people rank X versus Y, and not on how they rank other alternatives.lIf a social decision mechanism sati

16、sfies properties 1, 2, and 3, then it must be a dictatorship: all social rankings are the rankings of one individual.Externalities The lack of markets for externalities causes problems. With externalities,the market will not necessarily result in a Pareto efficient provision of resources. However, s

17、ome other social institutions can mimic the market mechanism. The model of smokers and nonsmokers (showing excellent analysis techniques). Person APerson BSMOKEMONEYAs indifference curvesPossible equilibrium XPossible endowment EPossible endowment EPossible equilibrium XBadGoodThe practical problems

18、 with externalities generally arise because of poorly defined property rights. Caose TheoremAsymmetric Information Common knowledge and private information. The latter leads toAsymmetric information, orAsymmetry of information.QualityDensityAkerlof model: the market for lemons. Adverse selection as a hidden inf